Chip Shortages
I thought for this month’s column it might be interesting to explore the chip shortage which is having an impact on everything from appliances to computers, jobs, and cars. Chips are the little devices that provide the various electronics used in most of the devices we use today. These chips we are talking about today are specifically programmable chips that provide computing functionality. These chips are frequently call SoCs which is an acronym for System on a Chip. A SoC typically contains all of the major functions of a computer including:
· A Central Processing Unit or CPU
· Random Access Memory or RAM
· Erasable Programmable Read Only Memory or EPROM
· Input and Output channels or I/O
The chips are programmed by the manufacturer to do various jobs like reading the state of buttons, turning lights on and off, controlling the speed of motors, or determining how fast something is going. Many SoC chips are used for a complex device like a car, or one or two chips might be used to control your microwave oven or laundry machine. Often these chips replace mechanical controllers that were used many years ago and were less accurate and more prone to failure.
Chips and Cars
When COVID-19 hit, the automotive industry had to close for a period of time. This meant the auto manufacturers no longer had a need for the chips they usually ordered for production. Because the auto industry uses just in time inventory, chips are made and delivered as they are needed. The auto industry stopped buying chips because they were not building cars. The chip manufacturers shifted to build more chips for consumer products like TV’s and appliances and stopped making the automotive chips. Now that the auto industry is trying to restart, they have to wait for the chip factories to switch back to producing the automotive chips. This means that cars are now being built to be stored and not sold until the electronics that run the cars become available again. This means fewer cars to sell and higher car prices. The higher prices and unavailability for new cars has also impacted the used car market since more people are buying used cars because the new ones are not available. I watched, for example, prices of used Nissan Altima’s jump over $2,000 in a period of two weeks. Now is not a good time to buy a car.
Computers
So, if all of the chips are being made for consumer electronics why are computers so expensive? Well, we can blame that on COVID too. When people could no longer work in their offices and children had to home school there was a sudden demand for computers at home. Not just one computer that everyone can share but separate computers for everyone in the home. Printers were also needed. There was a period in the past year where a home printer could not be found for less than $150. I have already seen printer prices dropping but there is another force keeping computer prices high, graphics.
Graphics Cards
Graphics cards contain graphic processing units or GPU’s. A GPU is a specialized processor that handles a few simple functions but does them very quickly. These functions are very useful for drawing things on the screen and doing it very quickly. Most modern video games count on this high-speed capability to render the scene on the screen fast enough to achieve 60 to 120 frames per second at HD and UHD resolutions. HD is 1920 by 1080 pixels and UHD is four-time HD in the number of pixels rendered.
It turns out that the processing needed to mine Bitcoins and other crypto currencies is closely related to the processing needed to render images on a screen. High end graphic cards that used to be available for gamers $150-$200 each can’t even be found. These GPU cards have been sold out for months. The GPU cards that are left are either too slow or too expensive (some at $600 to $1,000) for most gamers.
The End
Is there an end in sight? Yes, I believe there is. As more and more people become vaccinated against the COVID-19 virus and the world around us returns closer to normal, the demand for these chips will shift back to reflect the demand for the products they support. When this happens, the prices will normalize reflecting the basic rules of supply and demand. Until then, keep looking for bargains.